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U.S. Panel Recommends Trade Sanctions Against China Over Currency Regime

A commission mandated by the U.S. Congress called on Nov. 9 for trade sanctions against China as part of a four-track policy response if Beijing does not adopt a more flexible currency regime. In its annual report to Congress, the bipartisan U.S.-China Economic and Security Review Commission charged that the yuan was "highly undervalued" and called for an appreciation of the yuan "by at least 25%" against the U.S. dollar or a transparent, trade-weighted basket of international currencies.

The commission said that in the absence of "immediate steps" to allow for such a yuan rise, Congress should consider imposing an "immediate, across-the-board tariff on Chinese imports at the level determined necessary". "The U.S. can justify such an action under WTO Article XXI, which allows members to take necessary actions to protect their national security," it said.

"China's undervalued currency has contributed to a loss of U.S. manufacturing, which is a national security concern for the United States," it added.

The other steps it recommended were the filing of a complaint with the WTO and amending U.S. laws to identify and designate China a "currency manipulator."

In July, China made a modest step toward adopting a more flexible currency policy. But the change has resulted in an appreciation of the yuan of only about 2.1% against the dollar, the commission said.